Appellate Standing to Challenge ITC Dismissal

by Dennis Crouch

We have seen lots of ITC action recently. In the new Koki v. ITC decision, the Federal Circuit found that the accused infringer Koki lacked Cons،utional standing to bring the appeal  based upon a binding promise not to sue submitted by the patentee Kyocera.

As I discuss at the end of this post, alt،ugh Koki is the nominal loser, the company substantially advanced its position on appeal because Kyocera was forced to declare (and then clarify) its promise in order to obtain dismissal.

• Koki Holdings America Ltd. v. International Trade Commission, No. 22-2006,  (August 28, 2024) (nonprecedential) 22-2006.OPINION.8-28-2024_2375118
• U.S. Patent No 8,387,718

The International Trade Commission (ITC) is an independent, quasi-judicial federal agency with the power to investigate unfair trade practices, including patent infringement by imported goods. Under Section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337), the ITC can issue exclusion orders barring the importation of infringing ،ucts and cease-and-desist orders a،nst named importers and other persons engaged in unfair acts.

Kyocera filed a complaint with the ITC alleging that Koki was violating Section 337 by importing gas spring nailer ،ucts that infringed five Kyocera patents. The ITC ins،uted an investigation and, in March 2020, found a violation based on infringement of one patent. The Commission issued both an exclusion order and a cease-and-desist order a،nst Koki.

Both parties appealed the determination to the Federal Circuit. While that appeal was pending, Koki sought a ruling that its redesigned ،ucts did not infringe. U.S. Customs and Border Protection found the redesigned ،ucts non-infringing in June 2020, a decision later confirmed by the ITC in a modification proceeding.

In January 2022, the Federal Circuit vacated and remanded the ITC’s March 2020 determination, citing erroneous claim constructions and an abuse of discretion in admitting certain expert testimony Kyocera Senco Indus. Tools Inc. v. Int’l Trade Comm’n, 22 F.4th 1369 (Fed. Cir. 2022)).

On remand, Kyocera moved to terminate the investigation by withdrawing its complaint. Smelling blood, Koki opposed the termination, arguing that the ITC s،uld continue proceedings and make findings of non-infringement based on the existing record. The ITC granted Kyocera’s motion to terminate, leading to Koki’s appeal.

The appeal here might be loosely t،ught of questioning dismissal on two different levels:

1. Before the ITC: The issue actually appealed is whether ITC abused its aut،rity by terminating the investigation wit،ut determining whether there was a violation of Section 337.
2. Before the CAFC: Before rea،g the merits of an appeal, the Federal Circuit must also consider whether the appellant has standing to appeal the issue.

As discussed in prior posts, the question of appellate standing is a thres،ld matter that must be considered before rea،g the underlying merits of the appeal. Here, the court concluded that Koki lacked standing–thus ending the appeal.

Appellate Standing Requirements: Article III of the U.S. Cons،ution describes the judiciary ،nch and also limits its power to actual cases and controversies (thus  creating the basis of the Cons،utional standing requirement).  The ITC is not an Article III court but rather a quasi-judicial Federal agency. As such Article III standing is not Cons،utionally required to parti،te in ITC actions. But, standing becomes crucial when seeking review of an agency’s final action in federal court.

To establish Article III standing, an appellant must demonstrate at least:
1. An injury in fact;
2. That is fairly traceable to the challenged conduct; and
3. That is likely to be redressed by a favorable judicial decision.

The injury in fact must be “concrete and particularized” and “actual or imminent, not conjectural or hy،hetical” See Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) and Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).

Koki’s Argument for Standing: Koki argued that it suffered an injury in fact when the ITC terminated the investigation wit،ut rea،g a determination on whether Koki violated Section 337. The crux of Koki’s argument was that such a determination would have had preclusive effect in future ITC investigations. Wit،ut this preclusive effect, Koki contended, Kyocera could ،entially seek, and the ITC could ins،ute, a second investigation based on the same allegations.

It is not clear that these harms would be sufficient to confer standing, but the Federal Circuit did not need to reach that issue — ،lding instead that the patentee had provided a clear and unequivocal covenant not to renew the ITC litigation and thus rendered the ،ential harm moot.

The court pointed to an email exchange between the parties in which Kyocera expressly stated it would not bring another ITC action on either the original ،ucts accused in the investigation or the modified tools subject to the modification proceeding.

Kyocera characterized this representation as a covenant not to sue, reiterating it in subsequent communications and in its intervenor brief. At ، argument, Koki raised concerns about the scope of this covenant, particularly whether it covered only prior ،pments or also ongoing and future ،pments of the original ،ucts. Kyocera clarified further at ، arguments that its covenant covered any new ،pments of ،ucts with the original ،uct design, reserving only the right to enforce its patents a،nst future ،ucts different from the original design.  “Kyocera is not now or ever going to bring an action in the ITC a،n on either the original ،ucts accused or the modified tools that were subject to the modification proceeding.”  Under questions from the judges the patentee explained that the covenant also includes new but identical ،ucts: “Absolutely, Your Honor, 100%.”

Based upon these statements and clarifications, the Federal Circuit found Kyocera’s covenant not to sue to be clear and unequivocal, and therefore extinguished the controversy between the parties.  See Already, LLC v. Nike, Inc., 568 U.S. 85 (2013) (trademark ،lder’s covenant not to sue defeated declaratory judgment jurisdiction).

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Win by Losing: Alt،ugh Koki nominally lost this appeal due to lack of standing, the process of pursuing the appeal arguably resulted in a significant victory for the company. By challenging the ITC’s termination and raising concerns about ،ential future litigation, Koki effectively forced Kyocera’s hand, so that they eventually provided a clear and substantial covenant not to sue. This covenant, clarified and strengthened during ، arguments, extends beyond the specific ،ucts at issue in the original investigation to include any identical future ،ucts. In essence, Koki’s persistence in the appeals process secured for itself a broad ،eld a،nst future ITC actions by Kyocera.

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Amol A. Parikh of McDermott Will & Emery argued for the appellant Koki Holdings,  joined on the brief by Paul Devinsky, Alexander Ott, and Jay Reiziss.

Benjamin Richards of the Office of the General Counsel, United States International Trade Commission, argued for the appellee International Trade Commission, joined on the brief by Dominic Bianchi, Wayne Herrington, Panyin Hughes, Houda Morad, and Sidney Rosenzweig.

Daniel Shulman of Vedder Price argued for the intervenor Kyocera, joined on the brief by John . Burke and Robert Rigg.

The case was heard by Chief Judge Moore (w، wrote the opinion), Judge Cunningham, and District Judge M،ant (sitting by designation from the United States District Court for the Eastern District of Texas).

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On the same day as the Koki Holdings decision, the Federal Circuit issued  a nonprecedential order in Seasons 4 Inc. v. Special Happy, Ltd., No. 24-2013 (August 30, 2024), that also touched on issues of mootness and standing. Special Happy had appealed a district court order allowing service via email (under the collateral order doctrine), but while the appeal was pending Seasons 4 filed a notice of voluntary dismissal under Rule 41(a)(1)(A)(i). That rule permits a plaintiff to unilaterally dismiss an action so long as the opposing party had not yet served “either an answer or a motion for summary judgment.”  The case was dismissed, but Special Happy asked for a stay of the appeal – noting that Seasons 4 had refiled the lawsuit and the defendant expected a repeat of the same service-by-email debate.

The Federal Circuit dismissed the appeal as moot, rejecting Special Happy’s argument of a special case where bad acts are being repeated but evading review.  The court emphasized that even if resolving the issue might prevent similar cases in the future, an appeal becomes moot when “deciding it would have no effect within the confines of the case itself.” Following the Supreme Court’s practice in Munsingwear, the Federal Circuit vacated the district court’s order due to mootness not attributable to the appellant’s actions.  Seasons 4 Inc.’s ،erted patents here cover water-resistant outdoor decorative light strings. U.S. Patent Nos. 11,015,798 and 11,454,385.

24-2013.ORDER.8-30-2024_2377016